There May Never be a Better Time to Buy or Sell a Luxury Oceanfront Condo

August 10, 2012

Foreigners and Americans have been buying up most of the available luxury oceanfront condo and luxury waterfront home inventory from Palm Beach to Miami, partially because of the low interest rates. Not only are they getting a luxury waterfront property at unheard of prices, but they are paying almost nothing in interest. This is very appealing for those looking to purchase a vacation home and also for those who weren’t considering purchasing a vacation home at this time.

The Federal Reserve and the Treasury Department were hoping to see the 30-year mortgage rates become even more attractive for buyers. The interest rate on a 30-year mortgage was supposed to be close to 3.05 percent at this point according to analysts, but banks are profiting so much from home loans right now that it hasn’t happened.

“The banks may say, ‘We are offering you record low interest rates, so you should be as happy as a clam,’ ” said Guy D. Cecala, publisher of Inside Mortgage Finance, a home loan publication. “But borrowers could be getting them cheaper.”

Banks are making unusually high gains on mortgages these days, according to analysts. Mortgage bankers do acknowledge they are making money from the loans, but they say they can’t afford to lower interest rates anymore, because of the higher expenses from harsher regulations.

Banks are making money by bundling mortgages into bonds that they then sell to investors as pensions and mutual funds. The profit comes from the higher mortgage interest rates and the fact that bond rates are very low right now. The higher the interest rate on the mortgage, and the lower the interest rate paid on the bond means higher profits for the bank.

Mortgage lenders are benefiting from less competition as well. The four main mortgage lenders at this time are Wells Fargo, JPMorgan Chase, Bank of America and U.S. Bancorp.

“Fewer players in the mortgage origination business means higher profit margins for the remaining ones,” said Stijn Van Nieuwerburgh, director of the Center for Real Estate Finance Research at New York University.

It’s hard to say if mortgage interest rates will go lower or not, but it’s always a possibility.

Full Story: The New York Times